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California Web firms must register under seller law

By Laura Del Rosso

Febuary 14, 2001

Originally published at: http://www.abovealltravel.com/california.html

SAN FRANCISCO -- California for the first time is putting on-line travel firms and Web site operators on notice that they must be registered under the state's Seller of Travel Law before they can sell travel on line to California residents.

Under the six-year-old law, any company that sells retail or wholesale air or sea transportation to state residents -- regardless of where the firm is based -- must register with the California attorney general, pay a $100 annual fee and deposit client money in a trust account or maintain a bond. Failure to comply can lead to civil penalties of up to $2,500 per violation.

The law is little known outside of California, and it appears to be little known by travel companies that have Web sites.

Recently, the attorney general's office started surfing the Web and looking at the "large number of companies" that are not listing California Seller of Travel registration numbers on their Web sites, said Jerry Smilowitz, deputy attorney general in Los Angeles.

His office is sending "lots and lots" of warning notices every week to travel firms with Web sites that do not post registration numbers. California's message to anyone selling travel: Get registered.

Asked how many travel companies he believed are not complying, Smilowitz said he has no idea but it could be in the thousands.

"Our gut sense of the Internet is that it has a vast amount of resources and a vast number of companies," he said. "We don't have an idea of how many companies are not registered with us, but it's probably quite a large number."

Currently, about 6,000 travel firms are registered with the state attorney general's office, most of them in California.

There are about 5,600 ARC-accredited travel agent locations in California and, due to an enforcement effort in the state and warnings by trade associations to those agencies, awareness of the law and the registration requirement is widespread in California.

There is a way for those outside of California to exempt themselves from the law: don't accept business from California residents, Smilowitz said.

"If a company is marketing on the Internet or in any other way and does not want to register, then it must determine the residence of people who they do business with and then decline to do business with anyone in California," Smilowitz said.

Asked how it would be practical for an agent or tour operator with a Web site to ask every client who contacts them by phone or e-mail where they live before helping them, Smilowitz said "It's up to every company to make the call. Decide to register or do not do business with California residents."

He said his office has "not experienced any difficulties" with the on-line travel companies who have been mailed notices that they are not complying with the law. "They seem to be making good faith efforts," he said. "California is a large market for them."

He said the attorney general's focus on Web sites is merely an expansion of its enforcement activity, which had been centered on newspaper and magazine advertising, which also must carry Seller of Travel registration numbers.

In addition to requiring that the number is displayed in advertising and on Web sites, the law requires in-state companies to participate in the Travel Consumer Restitution Fund and to state in their advertising that they do so.

The $1.6 million industry-sponsored fund provides refunds and restitution for California residents who do not receive travel plans they paid for because of company failure or other reasons.

Companies based outside of the state cannot participate in the fund, and must disclose to California residents that they do not participate.

Another requirement is that companies that sell to California residents must deposit client money in a trust account or comply with the law's complex bond requirements.

In addition to the potential civil penalties of $2,500 per violation, companies that have not registered must pay late fees on top of the $100 registration. fee. The late fees are $5 per day, for a maximum of $500.

San Francisco travel attorney Alexander Anolik said his firm recently has been flooded with requests for help from Web-based travel firms that received the attorney general's notices.

Anolik, who also is ARTA's legal counsel, has long criticized the law, which is supported by the California Coalition of Travel Organizations, made up of ASTA chapters and other trade groups in the state. ARTA is not a CCTO member.

Anolik claims the law is unnecessary regulation, creates a bureaucratic headache for travel companies, turning some of them into "criminals" for violations of the law.

Yet Anolik jokes that he has been an indirect beneficiary of the law he has criticized because his law firm has gotten lots of business the last six years working for dozens of companies seeking legal advice about registering and complying with the law.


On-line sellers grappling with state regulation

NEW YORK -- Travelocity and Expedia are in compliance with the California Seller of Travel Law, according to their spokespersons, but neither company would comment on what they think of the law.

But, Deslie Webb, chief executive officer of Atlanta-based eGulliver.com, said the state of California should consider alternatives to the law.

"Certainly I understand that they want to protect consumers and it's very proactive," said Webb, who was unaware of the law. "And, I wonder if there may not be better ways to ensure customer satisfaction without [the state] having the potential added cost of monitoring and [spending] money for enforcement."

A lead-generation service, eGulliver doesn't "sell" travel per se, but funnels complex travel leads to 1,200 specialists around the country -- all of whom would presumably have to register if they sell to California consumers.

Companies like eGulliver and Vacation.com, which also forwards leads on its site to agency members, might have to register as well.

Vacation.com officials were unavailable for comment. But, Vacation.com member Wasserman Travel, a full-service agency in Vacaville, Calif., is registered, and president Morris Wasserman is very critical of the measure.

"The best thing I can say about the law is I hope it expires," Wasserman said, noting that agencies in California have to contribute to a restitution fund regardless of whether complaints are filed against them.

There are enough existing laws to protect consumers, Wasserman said, without singling out the travel industry for special oversight.

But, Ada Brown, the owner of another Vacation.com agency, Seaside Travel House in Long Beach, Calif., supports the law, saying it gives the industry more credibility with consumers.

"There have been times when I have made a sale that I might have lost," Brown said, noting that California residents who receive direct mail solicitations from out-of-state have more protections if they deal with California companies because of a restitution fund. "I have been able to recommend [tour operators] I know."

-- Dennis Schaal